[Issue 091] Guess which political party CEOs contribute to most?
I'm writing today's newsletter from Cartegena, Colombia where my partner and I decided to get away for a workcation (aka "working from home" in a different city) for a few weeks. It's my second time here, and I love it so much I've even convinced my family (my parents, four sisters, partners and my nieces) to join us for a few days in June. I am SO happy.
But being the true nerd that I am, last night I enjoyed the ocean view from our balcony while reading research. The topic: the politics of CEOs.
I can't even recall, but I came across this research paper a few days ago. The researchers used Federal Election Commission records to create a database of all political contributions of S&P1500 CEOs between 2000 and 2017. That was a total of 3,500 individuals (only 2.8% of whom were female) whose companies accounted for 90% of US market capitalization.
The report is all about the political contributions of CEOs and their transparency — which is not required thanks to Citizens United. To be considered a pro-Republican or pro- Democrat CEO, the executive had to direct at least two-thirds of their donations to candidates affiliated with that party.
What did they find?
CEOs disproportionately display pro-Republican preferences, with 60% contributing mainly to Republican candidates vs. 18% Democrat.
More than a quarter of executives gave enough to both parties to be classified as “neutral.”
75% of donations from the median chief executive were directed to Republicans, with 2x as much going to Republicans as Democrats ($123M vs $61M).
Public companies with Republican CEOs tend to be less transparent to investors when it comes to their political spending.
Why does this matter? I think the researchers said it best themselves:
Although public companies represent only 0.06% of the total number of U.S. firms, they account for 31.3% of private-sector employment, 41.3% of sales, and 51.1% of pre-tax profits. As key decision-makers within their firms, CEOs thus preside over a significant portion of the nation’s economy. Their decisions can have an enormous impact on jobs, wealth, tax revenues, and even the social fabric of local communities. These facts naturally make public-company CEOs important agents in the economy.
While the findings in this paper weren't particularly surprising to me, it was both refreshing to have the data and worrisome how little transparency there is. However, with the rise in research on political contributions and increasing shareholder pressure for transparency, I am hopeful that this will start to change.
In the meantime, we need to keep paying attention and decide what we want to do with the information we do have access to.
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This week's headlines were curated by ABL's intern, Lora.